Prior to the impact of Covid-19, rents in the residential segment were recovering in markets.
Residential market will remain tenant-friendly for a longer duration because real estate recovery will take longer to stabilise owing to fewer transactions, lower sales as well as uncertainty surrounding the coronavirus pandemic, say property analysts.
Due to ongoing situation surrounding Covid-19 resulting in job losses and salary cuts, co-living is also gaining momentum in the emirate.
Thomas Mathew, assistant vice-president Kamco Invest, rentals have been pushed at least one-step back from their respective pre-Covid-19 stages in the rental cycle due to fall in demand in the wake of job losses and salary cuts due to the pandemic.
"Prior to the impact of Covid-19, rents in the residential segment were recovering in markets where supply additions were minimal and government initiatives for home ownership were being rolled out," he added.
He said affordability continued to remain a theme, as good quality affordable units continued to witness stabilising rents. "However, with the onset of Covid-19, and lower visibility for growth in household incomes, we expect affordability to remain the dominant theme in the residential market, and asking rents for new tenancy contracts to trend lower in the near term before bottoming out," said Mathew.
In terms of upcoming supply, Kamco estimates around 135,350 units will be added to the GCC residential supply in 2020-21.
"In the residential market, unlike 2009, we think more significant price declines going forward could bring the yield discussion back into a compelling argument for investors, given the widening yield-to-borrowing rate spread prevalent currently," Kamco said.
According to Cavendish Maxwell's Property Monitor, median apartment rents declined 14 per cent whilst villa/townhouse rents were lower by 10 per cent in first quarter of 2020 as against the same period last year. Over 6,200 apartments and 800 villas/townhouses were handed over in Dubai during first quarter of 2020.
The real estate consultancy said transactions declined to 8,700 in first quarter of 2020 for both villas/townhouses and apartments as compared to 12,444 in fourth quarter of 2019.
Thomas Mathew said the timeline for rental recovery in the current cycle looks too early to ascertain, as "we would need to see the effects of Covid-19 impeding full potential business activity behind us. Moreover, risks to employment stability and remuneration would need to dissipate for asking rents to stabilise and eventually increase," he added.
Co-living gaining momentum
Aditi Hariharan Gouri, associate partner at Cavendish Maxwell, said given the current global health alert with Covid-19, the emerging residential co-living concept may see heightened interest.
"As companies worldwide have applied measures including installing hygiene dispensers, conducting awareness campaigns and applying work-from-home policies, co-living options would provide its largely young and professional audience the ideal setting of working remotely within a community, without having to rent office space or commute to a job," said Gouri.
Within Dubai, Emaar Properties offers this concept through Collective, Collective 2.0, and Socio projects at Dubai Hills Estate. Other projects under development include UNA by Nshama at Town Square and Koa's Canvas off Mohammad Bin Zayed Road.
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